Strategies: The smart way to form a business partnership

When starting a business, a partnership can appear to be an easy way to balance startup expenses, draw upon complementary skill sets, share risk and responsibility, or advance a mutual interest.

However, most partnerships fail due to lack of transparency at the start.

Lawyers, accountants and business advisers can help partners structure a business in a way that best protects each partner’s legal and fiscal interests. What they can’t determine are the personality conflicts, actions and feelings that may work to tear apart a partnership, and a business, if they’re not addressed up front.

Many experts agree it’s important to identify a partner with shared goals, similar communication styles, a complementary skill set and who you trust wholeheartedly. Unfortunately, these are difficult traits to assess up front.

For example, you may have worked with your potential partner in the past. From this experience, you know your work styles are similar, and you’ve been able to successfully communicate with one another to complete a project. But do you know how your potential partner views money? Or how they plan to balance work with life issues, such as illness or a new child?

A “partnership charter” is a way to outline the day-to-day rules of engagement between partners that dictate how you’ll address decision making, kids and family pressures, and other “soft” issues, such as hurt feelings, that commonly break apart partnerships.

A charter allows potential partners to lay out serious issues on the table, then take a step back and examine them to make sure the partnership is a good match. It also acts as a guide for future decisions. Most importantly, the process of creating a partnership charter can build trust between partners as it demands they confide in one another about serious and personal subjects.